KERRYCONNECT - AUGUST

Executive Summary

The global shipping industry grapples with increased blank sailings, especially in crucial East-West head haul routes. Current ocean freight reports underscore a severe space crunch, with carriers' utilisation rates reaching 95% for routes to Australia and New Zealand. As China's Golden Week on October 1st draws near, anticipate increased supply chain disruptions resulting from factory shutdowns and logistics challenges. 

On the aerial front, Etihad Cargo is broadening its footprint in China by introducing new freighter services.

Updated guidelines from DAFF highlight measures addressing the Brown Marmorated Stink Bug concerns for shipments originating from high-risk nations after September 1st, 2023.

Innovations in the supply chain spotlight a significant uptick in freight train cancellations and the increasing adoption of automation in logistics. Key industry headlines feature Kerry Logistics' growth in Sri Lanka, Zim's service realignment in the Asia-Australasia region, apprehensions regarding China's economic health, and predictions for the automotive logistics sector, which is anticipated to reach $340.34 billion by 2027. Stay ahead of the curve by staying informed and strategising your moves.

Business Tip

Keep an eye on your production forecast and upcoming ready-to-ship dates. The upcoming Golden Week in China will have an impact on transit times, equipment availability and cut-off windows.

Market Trend

Blank Sailings on the Shipping Landscape

The shipping industry, with its intricate web of routes and schedules, is currently facing a surge in blank sailings across major East-West head haul trades. These cancellations, occurring in routes like the Transpacific, Transatlantic, Asia to Northern Europe, and the Mediterranean, can have significant implications for businesses relying on timely shipments. In this blog post, we'll delve deep into the reasons behind these cancellations, their distribution across key routes, and the broader effects they might have on the global supply chain. Whether you're a shipper, a business owner, or just keen on understanding the industry's dynamics, it's crucial to grasp how these blank sailings could reshape the shipping landscape in the near future.

Sailing Cancellations: A Closer Look

Between weeks 34 and 38, 36 sailings have been cancelled across the major East-West head haul trades. This accounts for 5% of the total 665 scheduled sailings. Here's a breakdown of where these cancellations are happening:

• 58% of the cancellations are in the Transpacific East Bound (TPEB).
• 17% are on the Asia to Northern Europe and Mediterranean loops.
• 25% are on the Transatlantic route.
• Regarding shipping alliances, the Ocean Alliance (OA) has announced 10 cancellations over the next five weeks. This is followed by The Alliance (TA) with 8 cancellations and the 2M Alliance with 3 cancellations.
  
  

The Driving Forces: Supply and Demand

While many might think that demand is the primary factor influencing these changes, it's more about the supply. This will determine the stability of rates in the coming weeks. As we look ahead, we can expect supply normalisation with an annual fleet growth of about 2%. This growth will aid the dry market's recovery.

However, there's a twist: the scheduled delivery of new container vessels combined with reduced port congestion could put downward pressure on container freight rates. The container fleet growth is projected to rise to 7.3% in 2023 and 8.0% in 2024. This is a revision from previous estimates due to higher scrapping and slippage resulting from reduced earning expectations.

On the demand side, a negative growth is anticipated for the first half of 2023. However, a recovery in the latter half will lead to an overall demand growth of 1-2% in 2023, followed by a 5-6% increase in 2024.

Regulations and Their Impact

In the short term, we don't expect significant changes due to regulations. This is mainly because of the lack of scrap candidates and the transitional phase of current regulations. But, things might change in the medium term. With limited investment in alternative fuels and increasing costs related to regulations like the Carbon Intensity Indicator (CII) and the EU Emissions Trading System (EU ETS), we might see a boost in scrapping activities. This could lead to reduced sailing speeds to meet regulatory requirements or save on fuel costs, especially post-2025.

Upcoming Trends and Predictions

The forthcoming long holiday in China in September will likely add to space pressures. During this period, 15 blank sailings will be contributed by non-alliance members across various trades.

Regarding reliability, over 95% of ships are expected to sail on time in the next five weeks, with the 2M Alliance projecting a 97% reliability rate.

Recent General Rate Increases (GRIs) since June, combined with capacity shortages due to water level restrictions at the Panama Canal, have caused spot rates to surge by 2.3% across East-West trades. This is the highest increase in recent weeks, but rates are now starting to decline. To counteract this decline, carriers might implement more stringent cancellation programs with short notice on blanks.

Freight Rates: A Snapshot

As of last week, the composite freight rate index has risen by 2.3%. However, it has dropped by 71% year-over-year. This is an improvement of 6% from the previous week. Currently, rates are 32% below the 10-year average, indicating a return to more standard prices. However, they remain 29% higher than the average levels in 2019, before the pandemic.

We've observed a rate drop this week, and this trend is expected to continue into the first half of September. Rates might rise again as shippers will try to push cargo before the long October holidays in China. It's advisable to place your bookings in advance to avoid any inconvenience.

China Golden Week

China's Golden Week is more than just a holiday period. It's a time that can influence global supply chains, affecting businesses worldwide. By understanding its implications and planning ahead, businesses can mitigate potential challenges and ensure smooth operations.

Impact on Global Supply Chain during Golden Week

• Factory Shutdowns: Many factories in China cease operations during Golden Week, causing potential production halts.
• Logistics Interruptions: Both sea and air freight services face disruptions due to limited availability. This can result in blank sailings and consequent shipping delays.
• Communication Lags: With many professionals on holiday, communication with Chinese partners or suppliers might be slower than usual.

Strategies for Businesses

• Anticipate Delays: Given the disruptions, it's wise to foresee potential delays and modify your production and order schedules accordingly.
• Maintain Adequate Inventory: Ensure you have enough stock to cover both the holiday period and any post-holiday backlog.
• Engage Early: If you have urgent orders or concerns, it's best to communicate them well in advance to find collaborative solutions.

Ocean Freight Updates

• Space is tight and carriers' booking utilisation is 95% to AU, NZ fully booked at 100%, suggest placing bookings at least 3 weeks in advance.
• COSCO T/S via Singapore still has an issue with congestion, bookings will be affected depending on the service loop.
• Q3 - Q4 is the traditional peak so beware of upcoming space issues.

Ocean  Freight Snapshot (up to Aug 30th, 2023)

Air Freight Updates

Air Freight Snapshot (up to Aug 30th, 2023)

Customs and Biosecurity Update

We are coming into a busy time for Border Clearance for cargo, with increased spending in retail we aim to ensure your cargo is cleared accurately and efficiently. Here are some of the latest issues that your business should be aware of:

Brown Marmorated Stink Bug (BMSB) Measures

• With the 2023/24 Brown Marmorated Stink Bug (BMSB) season beginning next week, seasonal measures will apply in Australia and New Zealand to targeted goods manufactured and shipped from target risk countries from 1st September 2022.
• To help you better navigate this BMSB season, we've assembled a concise guide of BMSB measures across both countries, available HERE.
• Affected regions include much of Europe and North America.
• New Australian requirements released by DAFF include: New Master Consolidator (MC) Declaration Portal and Updated Master Consolidator User Guide for the new MC Declaration Portal; Addition of Uzbekistan to the Target Risk Country List; Creation of BMSB Frequently Asked Questions webpage

Free Trade Agreements (FTA) Updates

• Australia has recently established FTAs with India and the United Kingdom in the past year.
• A wide range of products are now covered under these agreements.
• If you ship from India or the UK, consult our Customer Service and Customs Teams to benefit from these FTAs.
• The European FTA is still under negotiation, with many factors from both sides needing resolution. It might take a considerable amount of time to finalize.

Tariff Concessions (TC)

• If you import goods not manufactured in Australia, we can help obtain a tariff concession.
• This could lead to zero duty payments on imports.
• Currently, 15,000 items are covered under this concession.
• Check out the latest announcements on tariff concessions

Supply Chain Innovation

• Freight train cancellations surged fivefold, reaching 12,708 in 2022/23 from 2,492 in 2021/22, impacting efforts for greener rail transport due to industrial action and severe weather disruptions.
• The global logistics automation market 2023 - 2030 report highlighted the rise of automation in logistics for efficient order fulfilment and supply chain optimisation, with North America leading the market and key players like Daifuku and Honeywell shaping its trajectory.
• A study on green supply chain impact found that retailer-led strategies and government interventions are essential for emission reduction.
• The global cross-border B2C e-commerce market is set to grow to $6,585.3 billion by 2032, driven by technology adoption, with North America and Europe dominating the market.
• Robotics and AI are reshaping supply chains beyond warehouses, with autonomous vehicles gaining ground in trucking and cargo planes.
• Industries, including logistics, are adopting greener practices to reduce their impact, with India aiming to save on fuel costs and cut CO2 emissions by adopting clean transport methods.